IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER August 2013, St. Petersburg

Transcription

1 IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER August 2013, St. Petersburg

2 AGENDA Highlights, Macro Environment, Financials Alexey Yankevich Member of the Management Board, CFO Upstream Mihail Zhechkov Head of Economics and Investment Department, Exploration and Production Division Downstream Vladimir Konstantinov Head of Economics and Investment Department, Refining and Marketing Division Strategy Sergey Vakulenko Head of Strategic Planning Department 2

3 DISCLAIMER This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Gazprom Neft and its consolidated subsidiaries. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Gazprom Neft to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, objectives, outlook, probably, project, will, seek, target, risks, goals, should and similar terms and phrases. There are a number of factors that could affect the future operations of Gazprom Neft and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, inclusively (without limitation): (a) price fluctuations in crude oil and oil products; (b) changes in demand for the Company s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) economic and financial market conditions in various countries and regions; (j) political risks, project delay or advancement, approvals and cost estimates; and (k) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as of the date of this presentation. Neither Gazprom Neft nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. 3

4 HIGHLIGHTS 1H 2013 Financial performance: Revenue: RUB 591 bln (+1.8% Y-o-Y) EBITDA*: RUB 151 bln (+0.9% Y-o-Y) Net Income: RUB 78 bln (-1.4% Y-o-Y) Operational progress in 1H 2013: Hydrocarbon production up 3.6% Y-o-Y Refining volumes down 0.8% Y-o-Y due to planned refinery turnaround Premium sales up 0.2% Y-o-Y Strategic advances: Gazprom Neft completes first oil shipment from Novoport field Yuzhno-Priobskaya compressor station receives first associated gas Quality program completed at all refineries Switch to Euro 5 quality motor fuels at all refineries G-Drive and G-Energy declared Brands of the Year 2Q 2013 vs. 1Q 2013: Hydrocarbon production up 1.2% Refining throughput up 4.5% Revenue up 2.4% EBITDA* down 3.7% on negative duty lag Net Income down 3.8% in line with EBITDA *Including GPN share in EBITDA of associates and joint ventures 4

5 Upstream Major project execution and use of new technologies deliver continued growth in hydrocarbon output 5

6 LEGACY FIELDS: EXPLORING NEW OPPORTUNITIES Exploration: Tight oil 1H 2013 Key events: Testing continues on Bazhenov formation at Palyanovskaya acreage of Krasnoleninskoye field Exploratory drilling identified Jurassic layer crude deposit in eastern section of Western Luginetsky license block. Well flowed naturally at a rate of over 17 m 3 /day Development: Implementing new technologies As part of large-scale implementation of horizontal drilling with multistage hydrofracs at Vyngapurovskoye field, completed first well with 8-stage hydrofrac, producing 75 tons/day Drilled first quadrilateral horizontal well at Umseyskoye field, with bore lengths reaching 1,000 meters. Initial production exceeded 200 tons/day. Began pilot project on use of acid fracturing technology on Paleozoic deposits at Urmanskoye and Archinskoye fields Gas: Improving associated gas utilization Expanded associated gas utilization in 1H 2013 by 12% Y-o-Y to 78% as a result of launching first phase of Noyabrsk Integrated Project in October 2012 and vacuum compressor stations at Vyngapurovskoye and Vyngayakhinskoye fields in 1Q 2013 Began startup of Yuzhno-Priobskaya gas compression station, which received its first associated gas. Began delivering associated gas to Priobskaya gas-turbine power station. Completion of Yuzhno-Priobskoye project will further increase utilization 6

7 GROWTH DRIVEN BY ORENBURG ASSETS, SEVERENERGIA, AND EFFICIENT DEVELOPMENT OF LEGACY FIELDS Group hydrocarbon production, MMtoe 2Q 2013 vs 2Q 2012 reconciliation Legacy fields Increased hydrocarbon production 4.4% Y-o-Y: Application of new technologies at legacy fields (+0.3 MMToe) Orenburg fields (+0.2 MMToe) SeverEnergia fields (+0.2 MMToe) Increased Priobskoye field production (+0.2 MMToe) Started production at Novoport ( MMToe) Growth partially offset by: Lower production at Slavneft and SPD fields (-0.2 MMToe) *As a result of the application of new standards IFRS 11 Joint Arrangements, the Group changed the accounting method for its interest in Tomskneft and Salym Petroleum Development from the equity method to proportionate consolidation. The operational information above is presented to show the production of JVs and affiliates. 7

8 GAZPROM NEFT LEADS THE INDUSTRY IN 1H 2013 HYDROCARBON PRODUCTION GROWTH Peer comparison: hydrocarbon production increase in Russia* 1H 2013 vs 1H 2012, % Gazprom neft Average daily production**, ktoepd Lukoil Rosneft Surgutneftegaz 155 TNK-BP 150 2Q12 3Q12 4Q12 1Q13 2Q13 * Source: Central Control Administration of the Fuel and Energy Complex. Not including share in joint ventures and associates. Y-o-Y growth in daily output in 1H 2013 due to: Implementation of horizontal drilling technologies, including multistage hydrofracs Bilateral horizontal drilling Increased natural gas production and utilization of associated gas, as a result of: Muravlenkovskiy project extension Phase 1 of Noyabrsk Integrated Project ** Gazprom Neft hydrocarbon production 8

9 ACTIVE USE OF NEW TECHNOLOGIES AT LEGACY ASSETS Horizontal Drilling As part of 2013 drilling efficiency improvement program, increased drilling of highly effective horizontal wells by a factor of 2.8 vs Multi-stage hydrofracking To increase efficiency and develop hard-to-recover reserves, plan to complete 4 times more multistage hydrofracs than in 2012 Applying new drilling mud technology, e.g. gel-emulsion Completed successful testing of Multibur drilling mud at Kholmistoye, Vorgenskoye and Karamovskoye fields, resulting in average production of approximately 70 tons/day, 3 times higher than expectation Acid hydrofracturing of Paleozoic deposits Pilot project to use acid hydrofracturing on Paleozoic deposits at Urmanskoye and Archinskoye fields. Acid technology enables production from carbonate reservoirs that cannot be developed using standard hydrofracturing. 9

10 DRILLED FIRST QUADRILATERAL WELL AT UMSEYSKOYE FIELD (KHMAO), DELIVERING 200 TPD INITIAL PRODUCTION Well No. 1001, Cluster 13 Umseyskoye Field Quadrilateral well drilled in an area that was: Not covered by existing production drilling Located in the water-oil zone (layer BS10) Highly compartmentalized formation Outrunning flooding after hydrofracturing in directional well Low permeability coefficient Technology screening (crude flow rates for well No.1001, tpd) In planning the drilling project, multiple options were evaluated, including 2, 3, 4 and 5 horizontal bores The quadrilateral well options was recommended following evaluation of well economics and technical risks Transport section Completion riser x 3.5 times Conductor Direction Crude flow rate shown by indicator permeability * reservoir thickness k = 5.0 md h = 3.0 m Quadrilateral well is 3.5 times more efficient than single horizontal well Note: k permeability, h - reservoir thickness 10

11 SIGNIFICANT GROWTH IN ASSOCIATED GAS UTILIZATION Associated gas production/utilization, bcm Utilization Flaring bcm of utilized associated gas Associated gas production/utilization 1H13 vs. 1H12, bcm 78%* 66%* F2013 Associated gas utilization, % * Risk of Rosneft limiting access to pipeline at Priobskoye * H13 F2013 1H12 * utilization, % 1H13 Drivers of increased associated gas utilization in Y2013 vs. Y2012: +0.5 bcm: full-year operation of Noyabrsk Integrated Gas Utilization project Phase I (launched October 2012) +0.3 bcm: increased associated gas utilization at Orenburg assets +0.1 bcm: new gas compressor stations at Vyngapurovskoye and Vyngoyachinskoye fields +0.2 bcm: planned new associated gas utilization facility at Priobskoye field 11

12 UPSTREAM PROJECT DEVELOPMENT UPDATE Russian projects 1H 2013 Key events: Messoyakha: Increased reserves by 2.9 MMtoe as a result of exploration program. Delivered 421 tonnes by winter road Orenburg: Launched high-pressure compressor, increasing associated gas production by 30 m 3 /day. Increased horizontal drilling program by 18 wells Novoport: Implemented winter crude shipments (12 mtonnes). Conducted test procedures and fracking at 4 wells (total initial production 535 tpd). Launched natural gas fired power plant. SeverEnergia: Completed 3D seismic at Evo- Yakhinskoye and Samburgskoye fields. Expanded first and second trains at Samburgskoye gas processing facility to projected capacity of 13.8 million m 3 /day). Launched first train of CPF at Samburgskoye field Prirazlomnoye: Approved oil spill response plan. Drilling contractor mobilization. Dolginskoye: Contracted for services to drill 3-SD well. Completed field stage of engineering surveys to drill 4-SD well in 2014 Chonskiy: Successfully completed field work for season (500 km 2 3D seismic, including 350 km 2 using UniQ technology); conducting drilling and core sampling at 4 exploration wells Kuyumba: Conducted seismic program for season (501.5 km 2 ), drilling three exploration wells 2013 Major goals: Messoyakha: Order equipment for key infrastructure. Drill and test exploration wells Orenburg: Increase production by 51.4% Y-o-Y. Expand drilling program at Tsarichanskoye field. Begin exploration programs at Filatovskaya area and Baleikinskoye field. Expand infrastructure at East Orenburg field Novoport: Examine results of long-term well operation. Develop utilization concept for hydrocarbons (crude + gas + gas condensate). Order compressor station and gas transportation equipment. Construct first phase of CPF for pilot oil production period SeverEnergia: Start test production at oil rims. Continue drilling and infrastructure construction at Samburgskoye and Yaro-Yakhinskoye fields Prirazlomnoye: Drill production wells. Precommissioning of offshore ice-resistant offshore platform. Conduct second phase of HAZOP Dolginskoye: Complete drilling 3-SD exploration well in 3Q 2013 Chonskiy: Complete electric exploration for volume of 6300 physical observation, retest two previously drilled wells, drill four exploration wells Kuyumba: Implement exploration program and test production (8 wells) 12

13 UPSTREAM PROJECT DEVELOPMENT UPDATE International Projects 1H 2013 Key events: Iraq (Badra): Two wells drilled and in development. Finalized EPC contract with Samsung to build gas infrastructure. Concluded EPC contract with CPP for connection to strategic pipeline. Began construction of export pipeline. Venezuela: Transferred operatorship to Rosneft. Began work on wells in block s eastern section. Brought 3 wells into production with average flow of over 300 tpd (including one in 2012). NIS: Extended exploration licenses in Serbia to Tested technology for small-bore drilling. Drilled first well in Romania and started testing. Began exploratory drilling in Bosnia and Hungary. Iraq (Kurdistan): Planned seismic exploration at Shakal block. Expanded activity at Halabja block. Completed 3D seismic in south of Garmian block Major goals: Iraq (Badra): Drill and complete well P8. Test three wells. Commission infrastructure for first phase of field development. Commission second phase of camp and begin gas infrastructure construction. Begin commercial production Venezuela: Implement early production project. Continue supplementary exploration. Continue work on FEED for infrastructure and upgrader. NIS: Drill six exploration wells; accelerate seismic program; consider additional exploration drilling program in Serbia for Continue exploration drilling in Bosnia and Hungary. Complete well test in Romania. Carry out 3D seismic at Block 2 in Romania. Iraq (Kurdistan): Shakal Block: Complete seismic, prepare to drill two exploration wells Garmian Block: Complete seismic, drill Hasira-1 well. Begin drilling Baram-1 well. Halabja Block: Mining and chemical audit. Demining and preparation for seismic activities 13

14 DEVELOPMENT OF HARD TO RECOVER RESERVES Key Events Kuyumba exploration and test production: Shot km 2 of 3D seismic; drilled a total of 5.9 km of exploratory wells, 13.9 km of development wells Palyanovskiy Project: Well 153 in Palyanovsk area flowed at 82 tpd from Bazhenov formation Formed JV with Shell to develop unconventional resources. Defined priority regions; project now in access phase Archinskiy Project: Well 1111 flowed at 90 tpd, confirming project s economic viability Well 153 P of Palyanovskaya area at Krasnoleninskoye field Archisnkiy Project Recoverable reserves: 5.6 MMtonnes Production level: 325 Mtonnes/year Palyanovskiy Project Recoverable reserves: 7.3 MMtonnes Production level: 168 Mtonnes/year 14

15 Downstream Continuing product quality increases and substantial growth in premium channels 15

16 CRUDE PRICES AND NETBACKS FALL AS RETAIL PRICES FLUCTUATE $/bbl Crude oil prices $/bbl Gazprom Neft average netbacks Domestic product wholesale prices change Domestic product retail prices change +11% Diesel +10% Diesel +7% Premium Gasoline (95) -2% Regular Gasoline (92) +5% Regular Gasoline (92) 16

17 87% OF OWN CRUDE PROCESSED IN COMPANY S HIGH QUALITY REFINERIES 1.52 MMTonnes -51.9% Crude Purchases Crude distribution, MMTonnes Change Y-o-Y MMTonnes Crude Production -0.5% 5.2 Omsk Refinery -1.0% Crude Balance 14.0 MMTonnes 76% Refining 2.8 Moscow Refinery -3.3% Crude purchases down 52% Y-o-Y in 2Q13 due to: Rise in Russian refining ahead of production increase Increase in export pipeline capacity due to ESPO-2 launch -10.8% Refining throughput at Moscow and Yaroslavl refineries is down 3% Y-o-Y in 2Q13 due to turnaround cycle difference Crude exports to CIS increased 78% due to deliveries to Kazakhstan 87% of own crude refined 24% Crude sales Q Yaroslavl Refinery NIS Belarus Export & international CIS Russia -3.2% +4.4% -37.8% -45.9% +78.2% -21.6% 17

18 REFINING HIGHLIGHTS Executing turnaround cycle extension programme Complete Quality programme at all Refineries Switch to Euro 5 quality motor fuels at all refineries Formed JV with TOTAL to produce euro-bitumen at Moscow Refinery Solomon availability Omsk Moscow Yaroslavl Q12 2Q13 2Q12 2Q13 2Q12 2Q13 18

19 COMPLETED RUSSIAN REFINERY QUALITY UPGRADE PROGRAM Omsk Gasoline excise tax rates*, RUB/tonne Gasoline yield Unit Capacity (MM tonnes) Year Isomerization FCC Hydrotreater Diesel Hydrotreater ,000 13,000 11,000 9,000 Naphtha Class 2 Class 3 58% 65% Class 5 Moscow 7,000 Class 4 34% 28% Class 4 Unit Capacity (MM tonnes) Year Isomerization ,000 Class 5 1H13 2H E 2015E 2016E 7% 7% 1Q13 2Q13 Class 3 FCC Hydrotreater Diesel excise tax rates*, RUB/tonne Diesel yield Diesel Hydrotreater (reconstruction) Unit Yaroslavl Capacity (MM tonnes) Year 8,000 7,000 6,000 Class 3 & below 28% 22% 61% Class 5 Isomerization FCC Hydrotreater Diesel Hydrotreater ,000 Class 4 50% 18% Class 4 Class 5 19% Class 3 4,000 2% Other 1H13 2H E 2015E 2016E 1Q13 2Q13 * Federal law project «About changing article 193 part 2 Tax Code of the Russian Federation» (approved by State Duma in first reading) 19

20 1,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1, RETAIL SALES GROW IN SECOND QUARTER Retail sales in 2Q 2013: Russia and CIS 2.0 MMTonnes +7.1% Y-o-Y NIS 0.2 MMTonnes +66.1% Y-o-Y Throughput per station in Russia reached 18.4 tpd in 2Q 2013 Non-oil sales grew by 41% Y-o-Y in 2Q 2013 Acquired 1 station, built 3 stations, reconstructed 19 stations, rebranded 2 stations Total number of active stations reached 1,655 Opened new stations under Gazprom brand in Bosnia- Herzegovina and Bulgaria Retail Metrics ,678 1,608 1,519 1,609 1,666 1,655 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 20

21 Gazprom Neft Russia GAZPROM NEFT RETAIL GASOLINE AND DIESEL SALES OUTPERFORM RUSSIAN AVERAGE +4.3% +3.4% + 8.3% % Gasoline sales growth drivers: Retail chain rebranding G-Drive fuel sales growth Loyalty program and non-oil sales Diesel sales growth drivers: Retail chain rebranding Non-cash payment system Loyalty program and non-oil sales 21

22 SUBSTANTIAL INTERNATIONAL EXPANSION IN PREMIUM CHANNELS Aviation Bunkering 1H 2013 Key events: Expanded global presence to 104 airports in 42 countries ( +16 in 1H 2013) Increased number of Russian and foreign contractors to 50 Awarded Emirates Airlines certificate for Recognition of High Service Level at Airports in the Russian Federation Market share* 22.9% Sales volume growth, MMTonnes 13.8% 1H 2013 Key events: Finalized acquisition of Romanian bunkering operator Marine Bunker Balkan S.A. Began bunkering operations in the port of Constanta in March 2013 Commissioned new Far East bunker tanker Conducted first bunkering operation in the port of Sochi Sales volume growth, Market share MMTonnes 17.2% 12.9% *includes Ministry of Defense market share 1H H H H

23 EXPANDING MARKET SHARE DRIVES VOLUME GROWTH Lubricants Bitumen 1H 2013 Key events: Sales of G-Family products grew by 41% y-o-y Began deliveries to Libya, Nigeria and Turkmenistan, bringing total number of foreign countries to 41 (+3 in1h13) Market share* 12.1% Sales volume growth, MMTonnes 15.7% 1H 2013 Key events: Began rail shipments of packaged bitumen from Omsk refinery in March 2013 Expanded product range at Moscow refinery; developed and implemented system for loading three products simultaneously for road transport Began production at bitumen plant in Kazakhstan Sales volume growth, Market share MTonnes 31.0% 56.3% H H H H

24 G-DRIVE AND G-ENERGY DECLARED BRANDS OF THE YEAR The G-Drive premium fuel and G-Energy premium-class motor oil brand names were awarded the 2012 Effie Brand of the Year award, given to the most successful brand creation and promotion programs G-Energy series is part of a new G-Family range of automotive oils. G-Profi motor oil for commercial van and truck diesel engines was approved for use by Mercedes-Benz. The G-Drive fuel advertising campaign links to Gazprom Neft's international G-Drive initiative in support of auto racing. Gazprom Neft supports the G-Drive Racing team by Signatech Nissan, which is performing in the FIA World Endurance Championship. Premium branded sales, MTonnes H12 1H13 1H12 1H13 24

25 Financials Production increases offset by adverse moves in prices, taxes, inflation and exchange rates 25

26 LOWER CRUDE PRICE AND HIGHER TAXES NEGATIVELY AFFECTED GAZPROM NEFT FINANCIALS Brent, export duty & Fx Rub. MET tax rate reconciliation Domestic product prices & excise taxes Crude prices decrease Y-o-Y and Q-o-Q Ruble devaluation lags oil price dynamics Growing Taxes: MET and Excise Domestic product prices stable K B characterizes the degree of depletion of the specific field. K 3 characterizes the relative size of the field (by reserves) and provides lower tax rate for small fields. 26

27 PROFIT ERODED BY TAXES AND TARIFFS ON NATURAL MONOPOLIES Revenues RUB bln % % % 591 Revenue grew 1.8% Y-o-Y on higher production volumes and increased sales through premium channels, partially offset by lower crude oil sales volume 2Q12 3Q12 4Q12 1Q13 2Q13 1H12 1H13 Expanded refining throughput and premium sales led to higher revenues Q-o-Q EBITDA* RUB bln % % % 151 Expanded production and product mix optimization supported 0.9% EBITDA growth Y-o-Y Lower crude and product prices and duty lag effect decreased EBITDA by 3.7% Q-o-Q 2Q12 3Q12 4Q12 1Q13 2Q13 1H12 1H13 Net income RUB bln % -3.8% % FX losses combined with rising depreciation expenses associated with investment program drove the 1.4% decrease in Net Income Y-o-Y Net Income change Q-o-Q is in line with EBITDA (-3.8%) 2Q12 3Q12 4Q12 1Q13 2Q13 1H12 1H13 *EBITDA includes share of affiliates EBITDA 27

28 EBITDA RECONCILIATION 1H 2013 VS. 1H 2012 EBITDA 1H 2013 vs 1H 2012, RUB mln 28

29 EBITDA RECONCILIATION 2Q 2013 VS. 1Q 2013 EBITDA 2Q 2013 vs 1Q 2013, RUB mln 29

30 STRONG FREE CASH FLOW GENERATION RUB million Cash flow reconciliation 1H 2013 (78,580) 125,885 (11,917) 35,388 (3,225) (6,011) (8,356) 1,186 18,982 Operating cash flow CAPEX Change in advances issued Free cash flow Acqusitions New projects Net borrowings Other Net cash flow 30

31 INVESTMENTS SUPPORT STRATEGIC GOALS AND UPSTREAM PRODUCTION IN MATURE FIELDS 12% Y-o-Y growth in brownfield capex due to increase in use of new technologies in legacy fields Active development of Orenburg, Novoport consolidation and continued Priobskoye development drove 67% Y-o-Y increase in greenfield capex Refining capex decreased 16% Y-o-Y as quality improvement projects reached completion at all refineries 20% Y-o-Y increase in marketing capex due to continued reconstruction and rebranding of newly acquired retail sites in Russia and abroad Investments in new projects increased 85% as a result of new project development (mainly Prirazlomnoye and Messoyakha) +22% 72,138 3,247 3,786 4,325 Investments (RUB mln) 87,816 6,011 3,225 1,799 5, ,333 17,135 26,668 15,957 27,424 30,588 1H H 2013 M&A includes NIS acquisition of downstream assets in the Balkans and increase in shares of equity affiliates Upstream brownfield Refining Other New projects Upstream greenfield Marketing and distribution M&A IFRS CAPEX 31

32 CONTINUED IMPROVEMENTS IN BALANCE SHEET AND DEBT PORTFOLIO % % 14.4% 0.5% % 20% 32.2% USD RUB Euro Other 52.9% Q13 2Q13 0% Net debt/ebitda (lhs) Debt to EBITDA target (lhs) Short term debt/total debt, % (rhs) Net debt/ebitda 0.4x vs. target <1.5x Increased average debt maturity from 3.81 years in 4Q12 to 4.46 years in 2Q13 Reduced average interest rate from 3.48% in 4Q 2012 to 3.30% in 2Q 2013 Diversified debt portfolio: bank loans, bonds, PXF (pre-export finance facility), LPN (loan participation notes) 32

33 Questions & Answers 33